Finding a new mortgage could save you hundreds of pounds a year
Are increases in your mortgages payments meaning you are starting to feel the squeeze? If you are ready to make a move to a better deal, here are ten things that you need to know about remortgaging.
1. Don�t stick with your SVR mortgage longer than you need to
There are more than half a million homeowners wasting hundreds of pounds every year by not switching from their lender�s standard variable rate (SVR). Don�t be one of them.
2. Being proactive with your mortgage pays
Whilst many borrowers are complacent, by being proactive you could save hundreds on your mortgage payments.
For example, a �100,000 mortgage on an SVR (Standard Variable Rate) of 7 per cent interest-only, costs �583 a month. By switching to a two-year fixed rate at 4.28 per cent you would only be paying �416 a month. That is a saving of �2,004 a year!
3. Beware of redemption penalties on your mortgage
These are charged when you leave a mortgage during its offer period or tie in period. Penalties can cost thousands, so make sure you get full information on any charges from your provider before switching. There is no point having any savings wiped out by the penalties.
4. Remortgage fees
Remortgaging can incur arrangement, valuation, legal and administration fees of up to �1,500. Make sure you factor the full costs of the fees when calculating the costs of remotgaging
5. Cutting costs by paying the fees
You can find mortgage deals that cover some of the remortgage fees for you. Fee-free deals tend to have higher rates than deals where you pay the fees. The rates tend to be up to a quarter of a percentage point higher than remortgage deals where you pay the fees. The larger your loan, the more cost-effective it will be to secure the most competitive mortgage rate and pay the fees.
6. Fixed or tracker?
Mortgages that track the base rate with a discount are usually cheaper than fixed rate deals. They are great if the base interest rate remains stable or drops, however if it rises so will your rates. The main question is whether you need stability or if you happier to take a chance that rates will stay stable or fall?
7. Remortgaging is relatively painless
A lot of people think that remortgaging takes ages, but don�t worry it is a relatively painless process and shouldn�t take up more than a few hours of your time. The whole remortgage process usually takes between four and six weeks. It is certainly worth it for the savings that can be achieved.
8. Don�t get carried away with the base interest rate
Unless you are an experienced economist it is best not to try to second guess the Monetary Policy Committee by waiting for rates to fall before switching mortgage deal. Plenty of the professionals get it wrong so the chances of getting it right are pretty slim.
9. Advice on mortgage advisers
With thousands of mortgages available, it is best to get an expert to find the most suitable one for you. Brokers work in different ways, some charge a fee and others offer a fee free service and are instead paid a fee by the lenders, but by doing this may not offer you the best deal as they rely on the commissioned income from the lender, possibly choosing a panel of lenders who pay the highest commissions. Understand how your broker operates, and work out the overall costs. It is always best to find a fully independent broker who has access to the whole of the market. If they have access to the whole of the market they should be able to find you the best deal.
10. Do you need to remortgage for the equity?
Releasing equity in your property by remortgaging can be a much cheaper way of borrowing than credit cards and personal loans. It can be tempting to cash in on your home to pay for anything from home improvements to holidays. However, taking out a large amount of cash and paying it back over the term of your mortgage means that you will be paying a lot more back in interest.
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